Abrasive grit like sand on the pad will groove the rotor and prevent pad wear, while reducing braking efficiency.
I'd replace the pads and have the rotor turned if the grooves are more than 0.020" deep -- this is a rather deep and obvious gouge that you can catch your fingernail in. If they are small, just replace pads.
A small stone tossed up by water or the wheel that gets behind the dust shield and lodges up by the pads can do the same thing -- I got a bit of limestone stuck behind the dust shield on the 220D that screeched so badly I finally pulled the rotor to get it out, it was driving me nuts. It had started a nice gouge, too, but it was shallow enough I left it alone.
1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!